Color Imaging Purchase

Yesterday, I purchased 900 shares of Color Imaging Inc. (CIMG.OB) for my son’s Coverdell ESA. I purchased the shares at $0.90 with a limit order. The total cost of the shares was $816.95 including commissions.
Color Imaging is planning to go private by conducting a reverse stock split and cashing out any remaining fractional holders after the split by paying them $1.10 per pre-split share. The exact ratio of the reverse split has not yet been determined, but it is proposed to be either 1,500 to one, 2,500 to one or 5,000 to one. The vote date for passing this proposed transaction is September 19, 2005.

I expect to receive cash for my shares within about two months given how soon the vote date is. I only purchased 900 shares, because I did not have sufficient cash in this account to purchase more. My expected profit from this transaction is $173.05, which is a 21 percent gain on my investment.

10 thoughts on “Color Imaging Purchase”

I also decided to make a play on CIMG as the September 19 voting date is approaching. I put in a limit order to buy 1400 shares at $0.87 on August 29. The order was only partially executed and I got just 1,101 shares. But that’s good enough for me now.

Since the 21% is for 2 months (say it takes 3 months) then your real return is 21X4=84% per annum. if in 2 months then it is 126%. D9n’t forget that you can do this in several accounts, such as your personal, your and your spouse’s IRA, your and your spouse’s Roth IRA and at more than one brokerage. Even if one of the deals falls through the yield still is good. Just do your homework and “due diligence”.
Another site for stocks (not reverse splits) ishttp://www.investhelp.com/mergers.phtml
usually you can find at least one fairly safe abitrage situation.
Good hunting.

Bookie thanks for the link and the advice. I have also used my Roth IRA for these reverse splits, but I don’t completely track all my trades in my Roth IRA on this site. The link you provided on mergers is a good one. I have visited that site several times in the past.

Is it common in these ‘going private’ transactions to see a few days between the day the board approves it and the actual effective date? ie, for CIMG, it looks like the shareholder approval (non-issue due to majority of insiders) and board go-ahead was on Monday the 19th, while the effective date is targeted for the 22nd. I am new to these transactions (and your blog, thank you by the way), but am just surprised that the stock didn’t run up closer to 1.10 (some discount is expected, but it barely moved on Tues on decent volume). Thank you…

It is somewhat common for these going private transactions to take a few days before going private. I’ve also noticed that the stock price often doesn’t run up closer to the tender price in the final days as you might expect. Usually, the people who are interested in profiting from these transactions are already in the stock before a vote is taken, so it is not surprising that there are not many buying up the stock just before the effective date.